In 1974, the U.S. Government passed a law that allowed individuals to establish individual retirement accounts or IRAs. Before passing the law, it was tough for individuals to have a tax-advantaged retirement account outside of a retirement plan run by an employer.
Soon after, IRAs expanded to the formation of Self-Directed Individual Retirement Accounts, allowing individuals to direct retirement funds and invest in non-traditional investments such as private companies, bonds, real estate, and precious metals.
What Is a Precious Metals IRA?
A precious metals IRA refers to a Self-Directed IRA that allows you to rollover a portion of your current accounts or contribute to a new account and invest in certain types of gold, silver, platinum, and palladium. As an account owner of a precious metals IRA, a custodian authorized by the IRS holds the IRA contents for your benefit.
A precious metals IRA combines the tax benefits of a government-approved retirement account with precious metals. Plenty of coins and bars from around the world are approved for a precious metals IRA. When you add precious metals to an IRA with Century Gold, we store the precious metals in a precious metals depository approved by the IRS until it’s time to take distributions from the IRA.
Why Should You Include Precious Metals in Your IRA?
There are plenty of reasons why you should strongly consider a precious metals IRA. Precious metals are among the very few assets you can have in your possession and hold physically. Other reasons to invest in precious metals include:
Diversification helps you achieve a balanced investment portfolio by partially protecting you from a market event. If the stock market drops, for example, precious metals often increase in value.
Hedge Against Bad Government Decisions
Investing in precious metals is a great way to hedge against governments making poor economic choices that ultimately lead to rising inflation and further currency devaluation.
Peace of Mind
The same market forces that impact stocks and other paper assets don’t influence precious metals. Therefore, investing in precious metals adds a level of security for your retirement savings that paper investments simply cannot.
Supply and Demand
The demand for precious metals from central banks, financial institutions, governments, and the financial industry at large continues to rise at levels never seen before. As economic and political uncertainty continues to grow, the demand for the safety and security offered by precious metals continues to grow.
Similarly, as technology rises, so does the demand for industrial metals such as gold, silver, platinum, and palladium.
Precious metals are finite resources: They cannot be created on a computer or printed. And because they are limited resources, they can grow in value.
How Can Precious Metals Help?
According to data collected over the last 120 years, gold will likely outperform all other major fiat currencies. As such, precious metals will likely maintain their status as the only form of money that keeps their absolute purchasing power over time. Throughout history, you’ll find that governments have consistently debased currencies, oftentimes to finance public debt. That’s why gold is often considered the ultimate currency rather than just a commodity.
The results of a long-term study show that the price of gold has historically risen during periods of high inflation. And the greater the level of inflation, the more gold prices increase.
Moreover, today’s modern inflationary economy considers currencies a problematic store of value even when they’re not collapsing completely. Sudden injections of new money into an economy often inspire an illusionary sense of wealth in individuals.
During the most recent 2008 Great Recession, many experienced crippling losses and are still recovering from the financial crisis. If you’re nearing retirement age and you invest in only paper-backed assets like mutual funds or stocks, another economic meltdown could impact your retirement significantly.
What Happens When It’s Time to Take a Distribution?
If you have an investment inside an IRA, the IRS taxes it as ordinary income upon distribution. The IRS taxes similar investments held outside of qualified plans as capital gains, which can be much less than the income tax for most investors.
Since the security and safety of your precious metals IRA is crucial, clients investing in a precious metals IRA have the option to work with multiple, non-government, non-bank storage facilities with several depository locations throughout the U.S.
When you invest your IRA in the stock market, and the time comes to take a required minimum distribution (RMD), you get your distribution in dollars. Since the buying power of the U.S. dollar continues to diminish every other year, you can’t say for sure what dollars will be worth in 10 years.
This is where a precious metals IRA starts to stand out. Precious metals are the only assets you can own in an IRA that don’t require sale or liquidation before taking distributions. Unlike other investments in your IRA that you need to liquidate before distribution, metals give you a choice. You can have them liquidated inside the IRA or taken out of the plan as ‘in kind’ distributions in their physical form for physical delivery directly to you.
Precious Metals Vs. Stock Markets
Investors have led many to believe that the best investment strategy is to invest in the stock market – to buy and hold. But that strategy only works when markets are moving up and continue to do so over time. Unfortunately, trends have changed. Over the past two decades, markets have collapsed twice.
As such, today’s environment has changed, which requires new investment strategies. In the 1980s and 1990s, buying stocks and holding them made sense. In today’s extreme debt environment, the best buy and hold investment has been and will continue to be precious metals. As a pragmatic investor, you should know how to invest in gold and other precious metals.
From 1984 to 2000, you could invest in stocks and hold on to them for a long time with the confidence that you would see a positive return on investment. The favorable political environment and tech boom helped fuel the economy. The market had relatively small debt increases, and the late 90s even had a surplus.
During that time, precious metals behaved more like an insurance policy. But the last 20 years have seen a shift from a growth economy to a debt-fueled economy. Easy access to credit ultimately results in asset bubbles. Before long, the overvaluation of assets, along with dangerous debt levels, leads to costly defaults that eventually result in an all-out financial collapse.
Over the last 20 years, gold has meaningfully outperformed equities in the short run, long run, bull markets, and bear markets. History also shows that portfolios that include precious metals outperform those without precious metals. This outcome results from combining a steady long-term return with reliable hedging characteristics.
Liabilities, both government and personal, have nearly doubled since the 2008 Great Recession. Stocks and bonds are sitting at historic all-time highs thanks to lax/easy monetary policy. These exploding bubbles may result in a collapse that could wipe away all your savings and retirement.
This explains why investing in a precious metals IRA is so critical for any investor holding paper-based investments. The value of precious metals tends to increase as other assets classes sell off. The added value from a precious metals IRA can protect your wealth as an insurance policy and as a valuable asset.
For many Americans, recent events have brought back painful memories of the 2008 financial crisis or 9/11 – events that reshaped society significantly, from how we buy property and travel to the level of security and surveillance we’re accustomed to.
But such tough moments also present opportunities: more flexible and sophisticated use of technology, a revived appreciation of life’s simple pleasures, and less polarization. No one knows for sure what will come because the future remains unpredictable.
Recent events have also shed light on many faults in the current financial system. Specifically, the global pandemic has highlighted how vulnerable our banking systems and stock markets are. The Fed has tried to mitigate these problems by printing lots of money, but will that be enough to beat a worldwide recession? The fact remains, nobody knows. What we’re certain about is that things need to change before conditions get out of hand.
The Rise and Fall of the U.S. Dollar
If you consider the last hundred years, the U.S. dollar has experienced a significant decline in purchasing power. Paper currencies have been and always will succumb to global market instabilities. If the future brings even more frivolous government spending, political uncertainty, major market fluctuations, and global pandemics, you can expect paper currencies to continue to lose their buying power over time.
Besides a few outliers, the U.S. dollar’s purchasing power has decreased steadily since 1913 because of inflation. Inflation refers to the constant rise in the prices of consumer goods and services over the years. As prices rise, the total amount of goods you can purchase with a single dollar continues to decrease.
Did you know that the debt in the U.S. currently exceeds $28 trillion? Although this figure is alarming, it grossly underestimates the country’s true debt. When you factor in the government’s obligations, the country owes more than $155 trillion, which is nearly 800% of GDP.
Years ago, retirement income included Social Security benefits, employer pensions, and savings. Today, many people no longer have traditional employer pensions. What’s more, rising life expectancy levels mean we have to survive on retirement income for much longer than before.
The thing that hasn’t changed, however, is that there’s no one-size-fits-all answer to the question of how much retirement income people consider “enough.” Plenty of factors come into play, most notably, the extent that you can predict your retirement expenses.
Quite frankly, planning for retirement is a lifelong process. It’s not something you do shortly before you stop working. Throughout your working years, your planning will undergo several stages in which you need to monitor your progress and targets that allow you to make the right decisions to ensure you reach them.
A recession, a debt bubble, currency manipulation, or trade wars will hurt the value of paper money. Investing in a precious metals IRA could give not only the protection you need to survive but also what you need to thrive during unpredictable times. Precious metals like gold, silver, platinum, and palladium cannot be printed at will, carry no counterparty risk, and are real property that cannot be diluted.
Precious metals have withstood the test of time for thousands of years and have maintained their value in the face of war, global pandemics, threats of terrorism, currency devaluation, inflation, political turmoil, and market volatility.
Where Can I Find a Trustworthy and Reliable Gold Service?
When it comes to selecting a precious metals company, we know that there are plenty of options from which to choose. More importantly, meeting the plans and goals for your investment and retirement plans helps secure a profitable and healthy financial future.
At Century Gold, we’re eager to go above and beyond to provide nothing short of the best customer experience in the industry. Our team of experts will help you set up your precious metals IRA to diversify your current retirement plans. When you work with us, we promise to:
- Guide you through every step of the entire process
- Respect your individual needs and focus our efforts to furnish you with the tools necessary to make sound financial decisions.
- Provide you with the opportunity to invest in a tangible asset.
- Tailor investment strategies to cater to you based on your specific needs. We understand that no two clients are identical, so we work with each client to reach their personal goals.